Industry body National Association of Software and Services Companies has expressed its unhappiness on inter-state tax levy on e-commerce transactions, after the Government of Gujarat proposed a Bill to levy entry tax on consumers for such transactions.

The tax is payable by the consumers and will be collected and deposited by entities that bring specified goods to the state from any other part of the country, for consumption and sale.

"The e-commerce sector aspires to unify the country digitally into a single entity. Providing unrestricted cross border access to sellers as well as buyers is the prerogative of the government and is an important driver towards creating an ease of doing business," said R Chandrashekhar, president, Nasscom.

The move to levy interstate taxes is "flawed", said Nasscom, because it was "akin to introducing trade barriers to free interstate trade thereby restricting market access within the country".

It further said that e-commerce had helped small and medium businesses grow, irrespective of their location, and that such taxes would discourage local manufacturing by SMEs.

"Such tax structures will lead to additional burden on SME traders, enhanced litigation, and also reduce business efficiencies. It will also restrict choice of the customer," he added.

The move will affect logistics companies and the outside state sellers selling goods to customers in the state, Nasscom said in a statement.

The proposal will burden the service industry with sale of goods related compliances, administrative costs and unwarranted disputes for a short term making it "completely infeasible", Nasscom said.

Gujarat had passed the Bill on March 30 in the State Assembly, and a similar levy is being enforced in Assam, Odisha, Uttarakhand, Rajasthan and Mizoram and is proposed to be levied in Punjab, Himachal Pradesh, Uttar Pradesh and Madhya Pradesh.

"The proposed levy will have a short life in light of the impending GST reform," Nasscom added. "For collecting and depositing the tax, the deemed tax payer would be required to significantly re-vamp the IT systems to track the tax charged on inter-state sale of goods to Gujarat and determine the differential tax which has to be paid in the form of entry tax," it added.

"Cost of complying with this entry tax for thousands of sellers outside the state will be much higher than the expected outcome," Nasscom said.